Addressing threats to health care's core values, especially those stemming from concentration and abuse of power. Advocating for accountability, integrity, transparency, honesty and ethics in leadership and governance of health care.

Thursday, June 22, 2017

In Washington, DC the health care policy wars continue, with a few Republican senators working behind closed doors on a bill to "repeal and replace" Obamacare, aka the Affordable Care Act, and Democrats decrying their secrecy. Just as during the era in which Obamacare was enacted, there is constant discusison of how US health care costs continually rise, driving up insurance premiums, and how access to health insurance is continually in peril.

However, while the current Republican process to write new legislation seems strikingly opaque, in neither era has there been a frank discussion of why US health care costs are so amazingly high, and disproportionate to our mediocre health care outcomes. In particular, there has hardly been any discussion of just who benefits from the rising costs, and how their growing wealth may impede any real cost-cutting measures.

Extreme Compensation for Top Managers of Non-Profit Hospitals

An obvious example is the gravity defying pay given to top health care managers, particularly the top managers of non-profit hospital systems.

Such systems provide much of the hospital care to Americans, and most have declared their missions to be providing the best possible care to all patients, or words to that effect. Many explicitly include care of the poor, unfortunate and vulnerable as a major part of their missions. As non-profit organizations, their devotion of mission provides some rationale to their freedom from responsibility for federal taxes.

In particular, we have written a series of posts about the lack of
logical justification for huge executive compensation by non-profit
hospitals and hospital systems. When journalists inquire why the pay of
a particular leader is so high, the leader, his or her public relations
spokespeople, or hospital trustees can be relied on to cite the same
now hackneyed talking points.

It seems nearly every attempt made to defend the outsize compensation
given hospital and health system executives involves the same arguments,
thus suggesting they are talking points, possibly crafted as a public
relations ploy. We first listed the talking points here, and then
provided additional examples of their use.
here, herehere,here, here, and here, here and here.

They are:
- We have to pay competitive rates
- We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).

Yet as we discussed recently,
these talking points are easily debunked. Additionally, rarely do
those who mouth the talking points in support of a particular leader
provide any evidence to support their applicability to that leader.

But since May, 2016, we have steadily accumulated more stories about million-dollar plus pay for CEOs and other top managers of non-profit hospitals and hospital systems. The reports may be shorter than they used to be, as journalism comes under economic and other attack, and as more journalistic resources go to cover the current president. Here are some examples, in chronologic order per the date of the published article, rather telegraphically.

CaroMont CEO Doug Luckett, $1.03 million in 2015. Talking points = retain and brilliant "paying what it takes to ensure they attract and retain top-level talent that can help provide premiums health care"

Kettering Health System CEO Fred Manchur, $1.65 million in 2015, former president Terri Day, $1.23 million, current president Roy Chew, $1.07 million

Premier Health former CEO James Pancoast, $1.42 milllion (excluding retirement payments) in 2015. Talking points = brilliant "you've got one person at the top who's trying to provide oversight, direction, and strategy. At the same time, health care continues to grow in scope, complexity, regulation, and compliance."

WellSpan Health president Kevin Mosser, $1.6 million in 2014. Talking points = competitive rates Forrest Brisco, associate professor, Penn State Smeal College of Business, "nonprofit hospitals are competing with for-profit hospitals"; brilliant: "If you are at the top of a health care organization, you're going to have pay that's higher than many members of the organization. The the skill and knowledge to understand and interact with surgeons and physicians can command a high salary" [ed note: which often seems higher than those of some surgeons and physicians, though]; also brilliant: Robert Batory, senior vice-president and chief human resources officer, Wellspan, "Kevin has 24/7 responsibility for Wellspan."

Wellmont Health System CEO Bart Hove, $1.4 million in 2015. Talking points = competitive rates: Wellmont board of trustees chair Roger Leonard, "we have to compete on a national level and we're competing not just with other non-profits, but we're competing with other for-profits"

Mountain States Health Alliance CEO Alan Levine, $1.3 million in 2015. Talking points = competitive rates: HSHA board of trustees chair Barbara Allen, "make sure CEO pay is comparable to similarly sized facilities across the country with similar complexities"; retain and brilliant, "we want to attract the best talent ... and be able to retain him."

Yale New Haven Health System CEO Marna Borgstrom, $3.8 million in 2015. Nine other employees paid over $1 million, including Bridgeport Hospital CEO William Jennings, $1.5 million, Greenwich Hospital CEO Norman Roth, $1.3 million. Talking points = brilliant: Yale senior vice president of public affairs, "Yale New Haven Health is the largest and most complex health system in the state."

Also, a total of 39 people, including the above, received over $1 million in 2016.

General talking points = brilliant: "there are a limited number of executives experienced enough to guide a state-of-the-art hospital and growing healthcare system in an increasingly competitive and complex industry"; competitive rates: "pay and benefits for such executives need to be comparable to what they could receive at another leading national hospital system or another industry"

Summary and Conclusions

The current inflamed discussion of "Obamacare" and Republican attempts to "repeal and replace" it focuses on the costs of care and how they affect individual patients. Examples include concerns about health insurance premiums that are or could be unaffordable for the typical person; insurance that fails to cover many costs, and thus may leave patients at risk of bankruptcy due to severe illness; poor people unable to or who might become unable to obtain any insurance, and perhaps any health care. Yet there is little discussion of what really drives high and ever increasing health care costs (while quality of health care remains mediocre).

That may be because those who are benefiting the most from the status quo want to prevent discussion of their role. There are many such people, but top management of non-profit hospitals provide a ready example. Their institutions' mission is to provide care to sick patients. Many such hospitals specifically pledge to provide care to the poor, vulnerable, and disadvantaged. Non-profit hospitals have no owners or stockholders to whom they owe revenue.

Yet these days the top executives of non-profit hospitals receive enough money to become rich.

See the examples above.

The justification for such compensation is pretty thin. Consider the talking points above. Apparently hospitals are extremely concerned about paying top management enough to recruit and retain them. Yet there is much less evident concern about paying a lot of money to recruit and retain the health care professionals who actually take care of patients to fulfil the hospitals' mission. Hospital CEOs are frequently proclaimed to be brilliant, visionaries, or at least incredibly hard workers with very complex jobs. I wonder if those who make such proclamations have any idea what it takes to be a good physician or a good nurse. Yet such health care professionals' hard work, long training, devotion to duty, and ability to deal with trying situations and make hard decisions rarely inspire hospitals to shower them with money.

Furthermore, hospital CEO compensation is almost never justified in terms of their ability to uphold and advance the fundamental hospital mission, taking care of sick people. The articles above do not contain any justifications of generous CEO compensation based on hospitals' clinical performance or health care outcomes. At best, hospital executive pay seems to be justified by the hospitals' financial, not clinical performance.

So why do non-profit hospital CEOs get paid enough to become rich? Apparently, because they can.

As we discussed here,
there is a strong argument that huge executive compensation is more a
function of executives' political influence within the organization than
their brilliance or the likelihood they are likely to be fickle and
jump ship for even bigger pay. This
influence is partially generated by their control over their
institutions' marketers, public relations flacks, and lawyers. It is
partially generated by their control over the make up of the boards of trustees
who are supposed to exert governance, especially when these boards are
subject to conflicts of interest and are stacked with hired managers of
other organizations.

Furthermore, such pay may provide perverse incentives to grow hospital systems to achieve market domination, raise charges, and increase administrative bloat. As an op-ed in US News and World Report put it about executive pay in general,

But the executive pay decisions made inside corporate boardrooms have an enormous impact in the outside world. Outrageous pay gives top executives an incentive to behave outrageously.
To hit the pay jackpot, they'll do most anything. They'll outsource and
downsize and make all sorts of reckless decisions that pump up the
short-term corporate bottom line at the expense of long-term prosperity
and stability.

So I get to recycle my conclusions from many previous posts....

We will not make any progress reducing current health care dysfunction
if we cannot have an honest conversation about what causes it and who
profits from it. In a democracy, we depend on journalists and the news
media to provide the information needed to inform such a discussion.
When the news media becomes an outlet for propaganda in support of the
status quo, the anechoic effect is magnified, honest discussion is
inhibited, and out democracy is further damaged.

True health care reform requires publicizing
who benefits most from the current dysfunction, and how and why. But it
is painfully obvious that the people who have gotten so rich from the
current status quo will use every tool at their disposal, paying for
them with the money they have extracted from patients and taxpayers, to
defend their position. It will take grit, persistence, and courage to
persevere in the cause of better health for patients and the public.

And for our musical interlude, the beginning of "For the Love of Money," sung by the O'Jays, used in the official intro of season 2 of guess what show?

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